Continuity built into Indian policy, says Rajan

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Former Reserve Bank of India governor Raghuram Rajan suggests that regardless of whether Prime Minister Narendra Modi secures a third term in office or not, India is expected to continue following its existing economic policy path. The renowned economist suggests that the overall direction and strategies of India’s economic policies are likely to remain consistent, irrespective of changes in political leadership. Rajan’s statement indicates that the fundamental principles guiding India’s economic decision-making are robust and are not likely to be significantly altered by shifts in political power.

Rajan, speaking during an interview with Bloomberg TV’s David Ingles on Tuesday, highlighted the substantial continuity ingrained in Indian policy. “There is a lot of continuity built into Indian policy, Whatever government comes in will take a lot of the good stuff that has been done and continue it.”

He expressed confidence that regardless of the incoming government, much of the positive initiatives already undertaken would be sustained.

Rajan, currently a finance professor at the University of Chicago Booth School of Business, made these remarks while attending the UBS Asian Investment Conference in Hong Kong.

The six-week-long elections in India will conclude on June 1, with the results to be announced on June 4. Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) is widely anticipated to retain power. Financial markets are on edge as there could be a potential selloff if the BJP fails to maintain support. This concern stems from fears that a loss of BJP support could lead to a shift away from the economic reforms that have been implemented under Modi’s leadership. Investors are closely monitoring the election outcome, as any deviation from the expected result could have significant implications for India’s economic policies and market stability.

According to Bloomberg Economics, Between 2024 and 2026, India is slated to allocate Rs 44.4 lakh crore ($534 billion) towards the construction of new infrastructure. By systematically investing in infrastructure over the specified period, India aims to address critical infrastructure gaps, unleash its economic potential, and achieve a sustained growth trajectory of 9% by 2030. However, successful implementation will require efficient project management, effective governance, and coordination among various stakeholders to ensure optimal utilization of resources and timely delivery of projects.